Women-led MSMEs in India need more access to digital finance, study shows

By Puja Sharma

With India taking over the G20 Presidency in 2023, there is a growing interest to focus on both the achievements and issues related to the digital financial inclusion (DFI) of women and MSMEs in India. The report titled ”Digital Financial Inclusion of Women in MSMEs: G20 and India” supported by the National Bank of Agriculture and Rural Development (NABARD), focuses on India’s success and gaps in digital financial inclusion of women and the growing prioritization of DFI for women at a policy and programmatic level across G20 countries and in the G20 forum.

The report presents findings from a pilot survey of 308 women MSME owners and employees across four Indian states (Rajasthan, Gujarat, Karnataka, and West Bengal). During the COVID-19 pandemic, women-led businesses experienced an approximately 73% drop in revenues; 46% of these relied on savings to cope financially, 50 percent of the business closures were permanent and 62.5% required financial capability-building support.

While delivering the special address, Niraj Verma, Managing Director, NABCONS said “Women are facing various biases like hidden gender disparity, and lack of support and knowledge. Digital financial inclusion is the answer to that.”

 ICRIER’s report reveals that despite rapid digitalisation in G20 countries, there is still a significant gender gap in access to mobile and internet usage. In India, although the percentage of women owning mobile phones increased from 45.9% to 54% between 2015-16 and 2020-21, nearly 7 in 10 women in India have never used the internet due to patriarchal socio-cultural norms, women are discouraged from owning mobile phones which results in lack of access to technology.

In developed countries like Australia, Canada, Japan, and Germany, over 95 percent of the women made and/or received digital payments in both 2017 and 2021. In comparison, less than 50 percent of women in developing countries like India used digital payments in 2021.

The report further stated that although account ownership by women in MSMEs is high, the use of bank accounts and other financial services is limited. Also, while younger women are more likely to own a smartphone and make online payments through apps like Paytm and Google Pay, they are less likely to have a bank account, take a loan, or buy any kind of insurance.

The Government of India has introduced several schemes, targeting women entrepreneurs DFI over the past few years. Schemes such as the PMMY, have extended almost 68% of their total sanctioned loans to women. Despite these, India is considerably lagging behind DFI of women in MSMEs, among the developing G20 countries.

Speaking on the occasion, Deepak, Mishra, Director of ICRIER, said: “ICRIER’s report puts India’s progress on digital financial inclusion in the global context. While India has done incredibly well compared to its past performance, it has a long way to travel to create an all-inclusive digital financial system. Increased access to and usage of digital financial services by women will not only enable affordable transfers but also increase women’s bargaining power in case of social security transfers, strengthen women’s resilience to financial, economic, and health shocks and reduce discrimination/cultural bias against women as potential borrowers.”

The report suggests that there is considerable scope for MSMEs to gain from a more inclusive digital financial system. For example, a shift of MSME owners from cash-based transactions will save them money and time and their employees can receive wages in their accounts.  This requires the onboarding of owners into e-commerce platforms through training and capacity building.

With improved access to information regarding schemes and policies, the policies should have a clearly defined program cycle to avoid implementation issues. Regular monitoring and evaluation activities to measure the effectiveness of the program and identify subsequent gaps needs to happen. There is also a need to understand and examine the effect of the Covid-19 pandemic on women and come up with a toolkit for policymakers in developed and developing countries in the G20 to enable the DFI of women in post-pandemic recovery plans.

Key highlights

• ICRIER releases report on “Digital Financial Inclusion of Women in MSMEs: G20 and India”
• India has achieved gender parity in account ownership, but gaps remain in the use of financial services
• 308 women from MSMEs across four Indian states, namely Rajasthan, Gujarat, Karnataka, and West Bengal, participated in the pilot survey
• Nearly 7 in 10 Indian women have never used the internet, which limits their access to technology